EXHIBIT 10.29
MANAGEMENT AGREEMENT
for
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by and between
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as Lessee,
and
▇▇▇▇▇▇▇▇ Hotel Management, Inc.,
as Manager,
Dated __________________
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of _________________________, by and between
__________________________________________ ("Lessee"), having its principal
office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
HOTEL MANAGEMENT, INC., a Georgia corporation ("Manager"), having a principal
office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
PRELIMINARY STATEMENT
A. Lessee is the lessee of a __________________________ hotel on the
land herein described.
B. Manager is an independent contractor engaged in the management of
hotels throughout the United States, and Manager is experienced in the various
phases of hotel operations.
C. Lessee is desirous of utilizing the services and experience of
Manager in
connection with the operation of the hotel, and Manager desires to render such
services, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, Lessee and Manager agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. As used herein, the following terms shall have
the respective meanings indicated below:
1.01.1 Affiliate(s) - with respect to any entity, any natural
person or firm, corporation, partnership, association, trust or other entity
which, directly or indirectly, controls, is controlled by, or is under common
control with, the subject entity; a natural person or entity which has another
entity as an Affiliate under the foregoing shall also be deemed to be an
Affiliate of such entity. For purposes hereof the term "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any such entity, or the power to
veto major policy decisions of any such entity, whether through the ownership of
voting securities, by contract, or otherwise.
1.01.2 Capital Renewals - a collective term for (a) normal
capital replacements of, or additions to, FF&E, and (b) special projects
designed to maintain the Hotel in a first-class condition in accordance with the
standards contemplated by this Agreement, including without limitation,
renovation of the guest room areas, public space, food and beverage facilities,
or back of the house areas, which projects will generally comprise replacements
of, or additions to, FF&E, but may include revisions and alterations in the
Improvements; most of the expenditures for such special projects will be
capitalized, but a portion thereof may be currently expended, such as the
purchase of smaller items of FF&E, or expenditures which are ancillary to the
overall project but which are properly chargeable to Property Operations and
Maintenance under the Uniform System of Accounts for Hotels.
1.01.3 Capital Renewals Budget(s) - as defined in Subsection
4.02.1(b).
1.01.4 Claims - as defined in Subsection 12.03.1.
1.01.5 CPI - as defined in Subsection 4.02.3.
1.01.6 Commencement Date - _________________ (or such other
date as the parties may agree upon), the date Manager begins operating the Hotel
under the Agreement.
1.01.7 Compensation - the direct salaries and wages paid to,
or accrued for the benefit of, any executive or other employee together with all
fringe benefits payable to, or accrued for the benefit of, such executive or
other employee, including employer's contributions required pursuant to any
Legal Requirement, or other employment taxes, pension fund contributions, group
life and accident and health insurance premiums, and profit sharing, retirement,
disability and other similar benefits and severance pay owed to employees at the
termination of this Agreement, if any.
1.01.9 ERISA - the Employees Retirement Income Security Act of
1974, as amended.
1.01.10 Executive Staff - the general manager, resident
manager (if any), the assistant manager (if any) and all department heads,
including Director of Finance, Director of Rooms or Front Office Operation,
Director of Food and Beverage, Director of Marketing and Director of Human
Resources.
1.01.11 FF&E - all furniture, furnishings, equipment,
fixtures, apparatus and other personal property used in, or held in storage for
use in (or if the context so dictates, required in connection with), the
operation of the Hotel, other than Operating Equipment, Operating Supplies and
fixtures attached to and forming part of the Improvements.
1.01.12 Gross Operating Profit (GOP) - the excess of Gross
Operating Revenues over expenses and deductions incurred in the operation of the
Hotel by Manager in fulfilling its duties hereunder, determined in accordance
with the accounting system established by the Uniform System (except as modified
by this Agreement). In arriving at Gross Operating Profit, all expenses shall be
proper deductions from Gross Operating Revenues insofar as they relate to the
operation of the Hotel including, without limit, all Base Management Fees,
license fees, franchisor royalties and fees, and direct out-of-pocket charges of
Manager or its affiliates as well as corporate charges.
1.01.13 Gross Revenues - as defined in the Management Fee
Rider
1.01.14 Ground Lease - the ground lease, if any, described in
Exhibit II, pursuant to which the Land was demised to Lessee for the term
indicated on said Exhibit II.
1.01.15 Group Services - as defined in Section 4.03.
1.01.16 Hotel - the hotel, including the Premises, referred
to in the Preliminary Statement.
1.01.17 Impositions - all taxes, assessments, water, sewer or
other similar rents, rates and charges, levies, license fees, permit fees,
inspection fees and other authorization fees and charges, which at any time may
be assessed, levied, confirmed or imposed on the Hotel or the operation thereof.
1.01.19 Improvements - the buildings, structures (surface and
subsurface) and other improvements now or hereafter located on the Land.
1.01.20 Initial Term - as defined in Section 2.01.
1.01.21 Land - the parcel or parcels of land described in
Exhibit I.
1.01.22 Legal Requirements - all public laws, statutes,
ordinances, orders, rules, regulations, permits, licenses, authorizations,
directions and requirements of all governments and governmental authorities,
which, now or hereafter, may be applicable to the Premises and the operation
thereof, including, without limitation, those relating to zoning, building,
life/safety, environmental and health, employee benefits, and providing
continued health care coverage under ERISA.
1.01.23 Lessee - the person or entity named in the preamble
hereto, or the successor of Lessee's interest with respect to this Agreement.
1.01.24 License Agreement - the Franchise Agreement dated
____________ between Marriott International, Inc., as franchisor, and Lessee, as
franchisee, licensing the operation of the Hotel under the _______________ name.
1.01.25 Local Operating Account - one or more bank accounts
established by Manager for Lessee in one or more banks approved by Lessee.
1.01.26 Major Capital Improvements - as defined in Subsection
12.08.1.
1.01.27 Managed Hotels - a collective term for the Hotel and
all other hotels within the United States of America owned, leased and/or
operated under the ________________ name by Manager or its Affiliates.
1.01.28 Management Fee - as defined in the Management Fee
Rider.
1.01.29 Minimum Balance - as defined in Section 7.02.
1.01.30 Mortgage - as defined in Section 9.03.2.
1.01.31 Net Operating Income - as defined in the Management
Fee Rider.
1.01.32 Operating Equipment - all china, glassware, linens,
silverware and uniforms used in, or held in storage for use in (or if the
context so dictates, required in connection with), the operation of the Hotel.
1.01.33 Operating Funds - as defined in Section 7.02.
1.01.3 Operating Period - the period beginning with the
Commencement Date and ending upon the expiration or termination of this
Agreement.
1.01.35 Operating Supplies - consumable items used in, or held
in storage for use in (or if the context so dictates, required in connection
with), the operation of the Hotel, including food and beverages, fuel, soap,
cleaning material, matches, stationery and other similar items.
1.01.36 Operating Years - the Operating Years shall coincide
with, and be identical to, the calendar years. If this Agreement shall be
terminated effective on a date other than December 31 in any year, then the
partial year from January 1 of the year in which such termination occurs to such
effective date of termination shall be treated as an Operating Year; references
to "full Operating Years" shall mean those Operating Years which are
co-extensive with full calendar years and shall exclude any partial Operating
Year at the beginning or the end of the term of this Agreement.
1.01.37 Other Managed Hotels - all hotels and inns within the
United States other than the Hotel owned, leased and/or operated by Manager or
any of its Affiliates.
1.01.38 Permitted Exceptions - (i) the Ground Lease, if any,
and the terms thereof; (ii) any Mortgage on the Land, and any modifications,
extensions, renewals and/or refinancings thereof and the terms thereof; (iii)
liens for Impositions not delinquent; (iv) undetermined or inchoate liens or
charges for labor or materials supplied to the Project in connection with the
construction or current operation thereof, which have not at the time been filed
or recorded pursuant to law; and (v) easements, restrictions on use, zoning laws
and ordinances, rights of way and other encumbrances and minor irregularities in
title, which do not individually or in the aggregate impair the use of the
Premises for hotel purposes.
1.01.39 Premises - a collective term for Land and
Improvements, and Lessee's interest therein, and any greater estate or interest
hereafter acquired, together with all entrances, exits, rights of ingress and
egress, easements and appurtenances belonging or pertaining thereto.
1.01.40 Project - a collective term for the real and personal
property comprising the Hotel, and the development and operation thereof.
1.01.41 Term - as defined in Section 2.01.
1.01.42 Uniform System of Accounts for Hotels - shall mean the
Uniform System of Accounts for Lodging Industry (Ninth Revised Edition, 1996);
such term shall not be deemed to include any subsequent revisions of the Uniform
System of Accounts for Hotels.
1.02 References. Except as otherwise specifically indicated, all
references to Article, Section and Subsection numbers refer to Articles,
Sections and Subsections of this Agreement, and all references to Exhibits refer
to the Exhibits attached hereto. The words "herein", "hereof", "hereunder",
"hereinafter" and words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or Subsection hereof. The terms "include"
and "including" shall each be construed as if followed by the phrase "without
being limited to". Unless expressly stated to the contrary, reference to any
Section includes the following Subsections thereof.
ARTICLE II
TERM AND RENEWAL
2.01 The Term. The initial term of this Agreement ("Initial Term")
shall commence on the date hereof and shall expire at midnight of the day
preceding the date which is three (3) years from the Commencement Date.
2.02 Renewal. The Agreement shall automatically renew for a period of
two (2) years, provided that neither party is in default. Any such renewal
period shall become part of the Term. In no event shall the Term of this
Agreement exceed the term of the License Agreement.
ARTICLE III
Intentionally Deleted.
ARTICLE IV
OPERATING PERIOD
4.01 Authority and Duty of Manager. Manager shall have the sole and
exclusive right and obligation to manage and operate the Hotel pursuant to the
terms of this Agreement and Manager agrees that it shall manage and operate the
Hotel as a first-class hotel comparable to Other Managed Hotels in accordance
with the standards for Residence Inn / Courtyard by Marriott hotels, taking into
account the size, location and character of the Project. In connection
therewith, Manager shall have the authority and responsibility, subject to the
provisions of this Agreement, to (i) determine operating policy, standards of
operation, quality of service, the maintenance and physical appearance of the
Hotel and any other matters affecting operations and management; (ii) supervise
and direct all phases of advertising, sales and business promotion for the
Hotel; and (iii) carry out all programs contemplated by the Operating Budgets
and, as directed by Lessee, the Capital Renewals Budgets, which have been
approved by Lessee pursuant to Section 4.02. Lessee agrees that it will
cooperate reasonably with Manager to permit and assist Manager to carry out its
duties hereunder.
4.02 Operating Budgets and Capital Renewals Budgets.
4.02.1 Preparation. Manager will submit to Lessee not less
than forty-five (45) days in advance of each Operating Year, the following
budgets for such Operating Year:
(a) an Operating Budget composed of an estimate of
profit and loss by month, an estimated cash flow projection by
month, and departmental forecasts of operations (hereinafter
collectively called the "Operating Budgets"); and
(b) a budget covering estimated Capital Renewals,
which indicates in reasonable detail the replacements of, or
additions to, FF&E, and the nature of the special projects
covered thereby (herein called the "Capital Renewals
Budget(s)").
Budgets for Major Capital Improvements initiated under Section 12.08 shall be
treated separately and shall not be included in the Capital Renewals Budget.
4.02.2 Review. In connection with the submission of the
Operating Budgets and the Capital Renewals Budgets, the representatives of
Manager will meet with Lessee to have an in-depth discussion thereof, including
a comparison with the previous year's performance of the Hotel, a discussion of
marketing strategy, identity of markets and the proposed expenditures contained
in the Capital Renewals Budget.
4.02.3 Approval of Budgets. The Operating Budgets and the
Capital Renewals Budget shall be subject to the approval of Lessee, which shall
not be unreasonably withheld or delayed, it being contemplated that each such
Operating Budgets and Capital Renewals Budget shall be agreed upon by the
parties within thirty (30) days after the submission of the same by Manager to
Lessee. If Lessee shall fail to approve any Operating Budgets or Capital
Renewals Budget within thirty (30) days after its submittal by Manager, or to
submit its written objections thereof to Manager within such period, in case of
a dispute with regard to any Operating Budgets, then pending the settlement
thereof, or until such dispute is resolved in accordance with Section 12.04,
Manager shall be entitled to continue to operate the Hotel in accordance with
the standards set forth herein and shall be entitled to make expenditures which
are consistent with the Operating Budget for the immediately preceding Operating
Year; provided that, subject to the standards of performance described in
Subsection 4.02.4 below, the maximum approved amount of such expenditures shall
be equal to (a) the aggregate of all items set forth in the Operating Budget
which are not disputed by Lessee, plus (b) with respect to all items in the
Operating Budget which are disputed or objected to by Lessee, the amount
allocated to such item(s) in the Operating Budget for the immediately preceding
Operating Year increased by the greater of (i) five percent (5%), or (ii) the
difference between the Consumer Price Index (All Cities - All Items) (1982-84 =
100) (the "CPI"), on January 1 of the Operating Year immediately preceding the
Operating Year in question and the CPI on January 1 of the Operating Year in
question.
4.02.4 Performance Under Operating Budget. Manager shall use
commercially reasonable efforts to achieve the results set forth in the
Operating Budget with respect to any Operating Year; provided, however, that
Lessee acknowledges that the Operating Budget is a composition of estimates and,
therefore, Manager cannot guarantee or warrant that the actual operation of the
Hotel for any Operating Year will be as set forth in the Operating Budget for
such Operating Year.
4.02.5 Intentionally Deleted.
4.02.6 Compliance with Capital Renewals Budget. Manager shall
at all times comply with the applicable Capital Renewals Budget as directed by
Lessee, and shall not deviate in any substantial respect therefrom without the
prior written consent of the Lessee. Notwithstanding the foregoing, Manager
shall be entitled to make additional expenditures not authorized under the then
applicable Capital Renewals Budget in case of emergencies arising out of fire or
any other like or unlike casualty, or in order to comply with any applicable
Legal Requirements. Manager will promptly notify Lessee of any expenditures not
authorized under the then applicable Capital Renewals Budget.
4.03 Intentionally Deleted.
4.04 Intentionally Deleted.
4.05 Personnel.
4.05.1 General. Manager shall hire, discharge, promote and
supervise the Executive Staff of the Hotel, and shall supervise through said
Executive Staff the hiring, discharging, promotion and work of all other
operating and service employees of the Hotel. All members of the Executive Staff
of the Hotel shall be properly qualified for their positions, and the direct
compensation payable to such persons shall be comparable to the direct
compensation paid to the members of the Executive Staff of other comparable
hotels, taking into account the location and size of the Hotel. If the general
manager for the Hotel selected by Manager from time to time is not then an
existing employee of Manager providing services for Manager at one of the Other
Managed Hotels, Lessee shall have the right to consult with Manager regarding
the selection of any such individual as the general manager of the Hotel, but
the final selection of such general manager shall be at Manager's sole and
absolute discretion.
4.05.2 Manager as Employer. All employees of the Hotel shall
be employees of Manager or an affiliate of Manager, and all Compensation of such
employees shall be paid by Manager, and the amount of such payments shall
immediately be reimbursed to Manager by Lessee in accordance with Section 4.07
hereof. In the event an affiliate of Manager employs the employees of the Hotel,
Manager shall remain primarily liable for said employment. Manager shall also
have the right to use employees of Manager or its Affiliates not located at the
Hotel to provide services to the Hotel ("Off-Site Personnel") and the right to
have the general manager of the Hotel serve as the regional manger for Other
Managed Hotels, and all Compensation of such Off-Site Personnel shall
immediately be reimbursed to Manager by Lessee in accordance with Section 4.07
hereof, except Manager shall allocate a portion of said Regional Managers'
salaries and benefits to other supervised hotels. Likewise, Manager may also
allocation a portion of other Regional Manager's salaries and benefits from
other supervised hotels to the Hotel for benefits received by Hotel for such
services; provided that all such allocations shall have been approved during the
budgeting process for the then-current year. Manager shall also have the right
to have Off-Site Personnel performing regional or area duties relating to the
Hotel and Other Managed Hotels lodged at the Hotel from time to time free of
charge. Accordingly, Manager shall establish appropriate payroll accounts
covering all such employees of the Hotel. Arrangements shall be made such that
Manager can draw on the Hotel Accounts to transfer funds to such payroll
accounts immediately upon its payment of such Compensation. Manager shall
indemnify and hold Lessee harmless from and against any and all actions, suits,
claims, penalties, losses, damages and expenses, including reasonable attorneys'
fees, based upon or arising out of Manager's gross negligence or willful
misconduct in connection with the employment of any and all Hotel employees,
including but not limited to any claims based upon discrimination in employment.
4.05.3 Labor Relations. Manager shall negotiate for the best
interest of Lessee with any labor unions representing employees of the Hotel,
but any collective bargaining agreement or labor contract resulting therefrom
will be executed by Manager as the employer. In addition, it is understood that,
with respect to labor negotiations not involving multi-employer bargaining
arrangements applicable to the Hotel and other hotel properties not owned or
managed by Manager, Manager shall consult with Lessee in advance of, and, to the
extent practicable, during the course of, negotiations with any labor union.
4.05.4 Manager Personnel. If Manager shall reasonably deem it
advisable, it shall assign the general manager, the controller and other members
of the Executive Staff of the Hotel from the employees of Manager and its
Affiliates or from the staff of Other Managed Hotels. All such employees will be
paid their regular Compensation, such Compensation to be paid by the Hotel, or
if Manager deems it advisable, by Manager, in which case Manager will be
reimbursed by Lessee therefor as provided in Section 4.07.
4.05.5 Business Expenses. The Executive Staff and other
appropriate employees of the Hotel shall also be reimbursed for all reasonable
business expenses pertaining to the Hotel, including business entertainment and
travel expenses, in accordance with the standard practices in effect at Other
Managed Hotels.
4.05.6 Benefit Plans. etc. Manager shall have the right to
provide, and shall be obligated to provide if required by Lessee, to the
employees of the Hotel who are eligible therefor and who are not covered by
collective bargaining or similar arrangements, with benefits of the incentive
plans, and the pension, profit sharing or other employee retirement, disability,
health or welfare or other benefit plan or plans now or hereafter applicable to
employees of Other Managed Hotels, and to charge the Hotel with the Hotel's pro
rata share of the costs and expenses of such plan or plans allocated to the
Hotel on the same basis as allocated to participating Other Managed Hotels.
The parties agree and acknowledge that Manager may (but shall
not be required to) provide benefits and allow participation in such plans on
whatever modified basis as it may determine appropriate under the circumstances,
and may waive any waiting period or any preconditions to coverage or
participation otherwise applicable to such employees. No statement, promise,
representation or warranty regarding the terms of such plans or the
participation or coverage of employees shall be enforceable, binding or
effective in any way unless made in writing and signed by an authorized
representative of Manager.
Notwithstanding the foregoing, in no event shall Manager
initiate or adopt any plans, programs or benefits for Hotel employees not
otherwise in effect at Other Managed Hotels unless required by applicable
collective bargaining agreements.
4.06 Additional Responsibilities of Manager.
4.06.1 Manager shall in its own name, perform the following
additional services, or cause the same to be performed for the Hotel:
(a) establish and revise, as necessary,
administrative policies and procedures, including policies and
procedures for the control of revenue and expenditures, for the
purchasing of supplies and services, for the control of credit, and for
the scheduling of maintenance, and verify that the foregoing procedures
are operating in a sound manner;
(b) subject to compliance with the applicable Capital
Renewals Budget and subject to Section 4.06.02(b) hereof, and if
directed by the Lessee, make all repairs, decorations, revisions,
alterations and improvements to the Hotel as shall be reasonably
necessary for the proper maintenance thereof in good order, condition
and repair;
(c) subject to Section 4.06.02(b) hereof, purchase
such Operating Equipment and Operating Supplies as shall be reasonably
necessary for the proper operation of the Hotel in accordance with the
Operating Budgets;
(d) apply for, and use its reasonable best effort to
obtain and maintain, all licenses and permits required of Lessee or
Manager in connection with the operation and management of the Hotel;
Lessee agrees to execute and deliver any and all applications and other
documents as shall be reasonably required and to otherwise cooperate,
in all reasonable respects, with Manager in applying for, obtaining and
maintaining such licenses and permits;
(e) use its reasonable best efforts to do, or cause
to be done, all such acts and things in and about the Hotel as shall be
reasonably necessary to comply with Legal Requirements and the terms of
all insurance policies, and to discharge any lien, encumbrance or
charge on or with respect to the Hotel and the operation thereof, other
than Permitted Exceptions;
(f) in accordance with the Operating Budgets, pay all
Impositions and insurance premiums, when due;
(g) use its reasonable best efforts to cause the
Hotel to comply with all applicable covenants and provisions of the
Ground Lease (if any) and Mortgage, and pay, when due, the installments
of rental under the Ground Lease (if any) and of principal and interest
on the Mortgage, if directed by the Lessee; and
(h) subject to the prior written approval of Lessee,
retain legal counsel for the Hotel, which legal counsel shall perform
legal services under the direction of Manager.
4.06.02. Except in the following instances, the
parties agree that Manager shall not be acting as agent of Lessee.
Manager shall, as agent of Lessee, either in its own name or in the
name of the Lessee, perform the following additional services, or cause
the same to be performed for the Hotel:
(a) subject to the prior written approval of Lessee,
consummate leases with respect to the commercial and office space in
the Premises and concession or other arrangements with respect to other
space and facilities on the Premises; and
(b) enter into any contracts, purchase orders or work
orders for goods or services to the Hotel; provided that Lessee's prior
written approval shall be required for any contract having a
non-terminable term in excess of one year, or if the amount of the
aggregate expenditures thereunder would, or are reasonably anticipated
to, exceed $50,000.00 in the aggregate per annum.
Lessee shall be entitled to meet with the regional manager of Manager
or other responsible Manager representatives on a quarterly basis to review and
discuss the operation of the Hotel, including any substantial deviation from the
operating strategies, policies or procedures which form the basis on which the
current Operating Budgets were made. Manager shall reasonably consider any
comments or suggestions of Lessee.
4.07 Reimbursements to Manager. In addition to the Management Fee provided for
in Article VI, Manager and its Affiliates shall be entitled to be reimbursed for
the following costs and expenses incurred in rendering services to the Hotel:
(a) the Compensation paid by Manager or its Affiliates to
Hotel employees;
(b) the Compensation payable to all officers and employees of
Manager and its Affiliates (other than Vice Presidents, and higher
ranking executive officers), who are not assigned to the Hotel, under
Subsection 4.05.4, while working exclusively on an assignment for the
specific benefit of the Hotel;
(c) reasonable travel and entertainment expenses of all
officers and employees of Manager and its Affiliates incurred in
performing its duties hereunder in connection with any phase of the
operation of the Hotel in accordance with the policies of Manager then
in effect;
(d) the Compensation and expenses paid or reimbursed by
Manager or its Affiliates to all independent consultants rendering
services to the Hotel if and to the extent contemplated in the
Operating Budgets or Capital Renewals Budget for such Operating Year or
as otherwise approved by Lessee;
(e) the costs and expenses of centralized accounting services
under Section 7.07; and
(f ) all other expenditures which are authorized, permitted or
required under the provisions of this Agreement which have been paid or
funded by Manager on Lessee's behalf.
It is agreed that, to the extent the entire amount of Compensation or other
expense reimbursable to Manager or its Affiliates under the provisions of this
Section 4.07, or under any other provisions of this Agreement, is not incurred
solely for the benefit of the Hotel, then such amount or expense shall be
appropriately allocated.
Manager shall be entitled to reimburse itself and its Affiliates for the above
items out of the Hotel Accounts.
ARTICLE V
INSURANCE
5.01 Coverage.
5.01.1 Required Insurance. The following insurance shall be
secured and maintained with respect to the Hotel at all times during the term of
this Agreement:
(a) All risk property insurance, including fire,
windstorm, flood, earthquake and other risks covered by
extended coverage endorsements on the Improvements and
contents in an amount equal to the full replacement value
thereof,
(b) All risk business interruption insurance,
including fire, windstorm, flood, earthquake and other risks
covered by extended coverage endorsements for full recovery of
the net profits of the Hotel for the entire period of any such
business interruption, or not less than twelve (12) months;
(c) Insurance against loss from accidental damage to,
or from the explosion of, boilers, air conditioning systems,
including refrigeration and heating apparatus, pressure
vessels and pressure pipes in an amount equal to the full
replacement value of such items;
(d) Business interruption insurance against loss from
accidental damage to, or from the explosion of, boilers, air
conditioning systems, including refrigeration and heating
apparatus, pressure vessels and pressure pipes for full
recovery of the net profits for the entire period of any such
business interruption;
(e) Comprehensive or Commercial general liability for
any claims or losses arising or resulting from the Hotel, with
combined single limits of $1,000,000 per each occurrence for
bodily injury and property damage. If the General Liability
coverages are provided by a Commercial General Liability
policy form, the General Aggregate Limit shall not be less
than $2,000,000, and it shall apply in total to this Hotel
only by specific endorsement. Such insurance shall be on an
occurrence policy form and shall include premised and
operations, independent contractors, blanket contractual,
products and completed operations, advertising injury,
employees as additional insureds, broad form property damage,
personal injury, incidental medical malpractice, severability
of interests, and explosion, collapse and underground coverage
during any construction;
(f) If the Manager will provide valet parking,
garagekeepers liability insurance in a minimum amount of
$100,000;
(g) Statutory workers' compensation insurance on all
employees in accordance with the requirements of applicable
law;
(h) Employment practices liability insurance in an
amount not less that $1,000,000.00, per occurrence and
$1,000,000.00 in the aggregate (the amount of any deductible
under such insurance shall be paid out of Gross Revenues
unless the claim arises out of Manager's gross negligence or
willful misconduct); and
(i) Insurance against such other insurable risks as
any mortgagee may, from time to time, reasonably require;
(j) Liquor Liability (if applicable) for combined
single limits of bodily injury and property damage of not less
than $1,000,000 per occurrence;
(k) Business Auto Liability including owned,
non-owned and hired vehicles for combined single limits of
bodily injury and property damage of not less than $1,000,000
per occurrence;
(l) Umbrella Excess Liability in amounts not less
than $9,000,000 in excess of the liability insurance required
in subsections (e), (g), (j) and (k) immediately above. The
amount of such coverage shall be increased as Franchisor
requires;
(m) Comprehensive crime insurance in a minimum amount
of $50,000.
5.01.2 Responsibility to Maintain. During the Operating
Period, Lessee, or if and to the extent requested by Lessee, Manager at the
expense of Lessee, shall procure and maintain the insurance policies required
under clauses (a) through (f) and (i) through (l) of Subsection 5.01.1, and
Manager shall procure and maintain the coverages required under clauses (g), (h)
and (m) of that Subsection, at the expense of Lessee.
5.01.3 Requirements. All policies of insurance shall be
written on an "occurrence" basis, if possible. The insurance coverage shall in
any event comply with the requirements of the Mortgage, if any. Any deductibles
within the insurance policies required above shall not exceed $25,000, except
for wind, flood, and earthquake deductibles which shall be approved by Lessee or
bought down to $25,000 at the expense of Lessee.
5.02 Policies and Endorsements.
5.02.1 Policies. All insurance provided for under the above
Section 5.01 shall be effected by policies issued by insurance companies of good
reputation and of sound and adequate financial responsibility, and rated no less
than A-VIII in Best's Insurance Guide. The party procuring such insurance shall
deliver to the other party certificates of insurance with respect to all of the
policies of insurance so procured, including existing, additional and renewal
policies, and in the case of insurance about to expire, shall deliver
certificates of insurance with respect to the renewal policies to the other
party not more than thirty (30) days after the respective dates of expiration.
If Lessee shall elect to procure any portion of the property insurance, it shall
also deliver to Manager full copies of the policies under which such insurance
is maintained.
5.02.2 Endorsements. All policies of insurance provided for
under this Article V shall have attached thereto (a) an endorsement that such
policy shall not be canceled or materially changed without at least thirty (30)
days prior written notice to Lessee and Manager, and (b) an endorsement to the
effect that no act or omission of Lessee or Manager shall affect the obligation
of the insurer to pay the full amount of any loss sustained. All insurance
policies procured by Lessee shall contain an endorsement to the effect that such
insurance shall be primary to any similar insurance carried by Manager.
5.02.3 Named Insureds. All policies of insurance required
under clauses (a) through (d) of Subsection 5.01.1 shall be carried in the name
of Lessee, and, if required, Mortgagee and the lessor under the Ground Lease, if
any, and Manager shall be named as a loss payee as to business interruption
insurance. Losses thereunder shall be payable to the parties as their respective
interests may appear. Notwithstanding the foregoing, if Mortgagee is an
institutional lender, and so requires, losses may be made payable to Mortgagee,
or to a bank or trust company qualified to do business in the state where the
Hotel is located, in either instance as trustee for the custody and disposition
of the proceeds therefrom. Lessee agrees to use reasonable efforts to attempt to
cause any mortgagee to agree that its mortgage shall contain a provision to the
effect that proceeds from property insurance shall be made available for
restoration of the Hotel. All insurance policies required in clauses (e), (f),
and (i) through (l) of Subsection 5.01.1, shall name Lessee and its Affiliates,
directors, officers, agents and employees of each such entity as named insureds,
and Manager, its Affiliates, directors, officers, agents and employees of each
such entity as additional insureds on a primary basis, irrespective of any other
coverage, whether collectable or not. Policies required in clauses (g), (h) and
(m) shall be written in the name of the employer.
5.03 Waiver of Liability. Neither Manager nor Lessee shall assert
against the other, and do hereby waive with respect to each other, or against
any other entity or person named as additional insureds on any policies carried
under this Article V, any claims for any losses, damages, liability or expenses
(including attorneys' fees) incurred or sustained by either of them on account
of injury to persons or damage to property arising out of the ownership,
development, construction, completion, operation or maintenance of the Hotel, to
the extent that the same are covered by the insurance required under this
Article V. Each policy of insurance shall contain a specific waiver of
subrogation reflecting the provisions of this Section 5.03, and a provision to
the effect that the existence of the preceding waiver shall not affect the
validity of any such policy or the obligation of the insurer to pay the full
amount of any loss sustained.
5.04 Insurance by Manager. Any insurance provided by Manager under this
Article V may, subject to Lessee's approval, be effected under policies of
blanket insurance which cover other properties of Manager and its Affiliates,
and Manager shall have the right to charge the Hotel with the Hotel's pro rata
share of such premiums shall be allocated to the Hotel on the same basis as
allocated to participating Other Managed Hotels. Any policies of insurance
maintained by Manager pursuant to the provisions of this Article V may contain
deductible provisions in such amounts as are maintained with respect to Other
Managed Hotels, for which Lessee shall be responsible or which Manager, at
Lessee's expense, may pay.
ARTICLE VI
MANAGEMENT FEE
In addition to the reimbursements required under Section 4.07 for Manager's
services hereunder during the Operating Period, Lessee shall pay Manager the
Management Fee computed and made payable as provided in the Management Fee Rider
attached hereto.
ARTICLE VII
ACCOUNTS; WORKING FUNDS; RECORDS AND REPORTS
7.01 Hotel Accounts: Expenditures.
(a) All funds derived from the operation of the Hotel shall belong to
and be the property of Lessee and shall be deposited daily by Manager in the
Local Operating Account. All disbursements and withdrawals from said accounts as
required or permitted under this Agreement shall be made by bonded
representatives of Manager whose signatures have been authorized. Reasonable
▇▇▇▇▇ cash funds and house banks, in amounts satisfactory to Lessee, shall be
maintained at the Hotel.
(b) All payments to be made by Manager hereunder shall be made from
authorized bank accounts, from ▇▇▇▇▇ cash funds or from Operating Funds provided
by Lessee pursuant to Section 7.02. All debts and liabilities which have been
validly incurred by Manager as a result of its operation and management of the
Hotel pursuant to the terms hereof, whether asserted before or after
Termination, will be paid by Lessee to the extent funds are not available for
that purpose from Gross Revenues. Manager shall not be required to make any
advance or payment to or for the account of Lessee except out of such funds, and
Manager shall not be obligated to incur any liability or obligation for Lessee's
account without assurances that necessary funds for the discharge thereof will
be provided by Lessee.
(c) All banks accounts shall be owned by Lessee and shall be solely
controlled and operated by Manager ; the agency status of Manager shall be
designated on the checks and drafts drawn on such bank accounts.
(d) Manager shall, on a bi-weekly basis (on a Friday, or if Friday is a
legal holiday, on the next business day), cause all amounts in the Hotel
operating accounts in excess of the Minimum Balance (as defined below) to be
wired electronically to a bank account designated for such purposes by Lessee.
(e) Manager shall submit to the Lessee by the fifteenth (15th) calendar
day of each Accounting Period a consolidated report for the Accounting Period
most recently ended detailing the flow of cash into and out of the Local
Operating Account, including investment income, cash deposits, credit card
deposits, payroll checks paid, operating expense checks paid, ACH drafts paid,
wires transmitted to Lessee and any other use of cash. This report must also
reconcile to the sum of the individual general ledger cash balances of the
Hotel.
7.02 Minimum Balance. During the Term of this Agreement, Lessee shall
maintain cash in the Local Operating Account ("Operating Funds") sufficient in
amount to properly operate the Hotel. If at any time during the Term, the funds
in the Local Operating Account fall below the Minimum Balance (as defined
below), Lessee shall deposit in the Local Operating Account additional funds in
an amount equal to the difference between the funds therein and the Minimum
Balance. As used in this Agreement, "Minimum Balance" means $50,000 in cash.
7.03 Books and Records. Manager shall keep full and adequate books of
account and such other records as are necessary to reflect the results of the
operation of the Hotel. For this purpose, Lessee agrees that it will make
available to Manager, or its representatives, all books and records pertaining
to the prior operation of the Hotel and any Major Capital Improvements. Manager
shall keep the books and records for the Hotel in all material respects in
accordance with the Uniform System of Accounts for Hotels, on an accrual basis
in accordance with generally accepted accounting principles consistently
applied.
7.04 Reports to Lessee. Manager shall deliver, or cause to be
delivered, to Lessee the following statements:
(a) within fifteen (15) days after the end of each calendar
month, a detailed profit and loss statement, substantially in the form
used at Other Managed Hotels, showing the results of operation of the
Hotel for such month and the year-to-date, and a statement of
departmental operations, for such month and year-to-date, and having
annexed thereto a computation in reasonable detail of the Management
Fee for such preceding month and the year-to-date, calculated as
provided in the Management Fee Rider and for the second full year of
the Operating Period, such reports shall include a comparison with the
prior year's results, and a balance sheet;
(b) within fifteen (15) days after the end of each Operating
Year, an unaudited financial statement consisting of a balance sheet, a
related statement of profit and loss and a statement of cash flows,,
and having annexed thereto a computation in reasonable detail of the
Management Fee for such year, calculated as provided in the Management
Fee Rider and for the second full year of the Operating Period, such
reports shall include a comparison with the prior year's results.
Audited financial statements shall be at Lessee's sole cost and
expense.
7.05 Lessee's Rights to Inspection and Review. Upon reasonable advance
written notice to the general manager of the Hotel, Manager shall accord to
Lessee, its accountants, attorneys and agents, the right to enter upon any part
of the Hotel at all reasonable times during the term of this Agreement for the
purpose of examining or inspecting the same or examining and making extracts of
the financial books and records of the Hotel or for any other purpose which
Lessee, in its discretion, shall deem necessary or advisable, but same shall be
done without material disruption to the operation and business of the Hotel and
for the second full year of the Operating Period, such reports shall include a
comparison with the prior years results.
7.07 Centralized Accounting Services. Manager may, in its reasonable
discretion, handle directly, or through an Affiliate or one of the Other Managed
Hotels, any of the accounting functions for the Hotel, including without
limitation, accounts payable, general ledger, payroll and accounts receivable,
or any part thereof, on a centralized basis with one or more Other Managed
Hotels for the purpose of achieving a more cost-efficient operation of the
Hotel. Manager or its Affiliate or the Other Managed Hotel furnishing such
centralized accounting functions shall be entitled to be reimbursed or paid from
the Hotel Accounts for (i) the pro rata share of the costs and expenses of
providing such accounting functions allocated to the Hotel on the same basis as
allocated to participating Other Managed Hotels utilizing such centralized
accounting services, and (ii) such amounts required to cover or reimburse
Manager, its Affiliate or Other Managed Hotel for the payment of authorized
expenditures by such entity as a part of such centralized accounting services
and as provided on the attached Management Fee Rider.
ARTICLE VIII
TERMINATION RIGHTS
8.01 Termination by Lessee. If any one of the following events shall
happen:
(a) if Manager shall fail to keep, observe or perform
any material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Manager, and
such default shall continue for a period of thirty (30) days
after notice thereof by Lessee to Manager;
(b) if Manager shall apply for or consent to the
appointment of a receiver, trustee or liquidator of Manager
or of all or a substantial part of its assets, file a
voluntary petition in bankruptcy, or admit in writing its
inability to pay debts as they come due, make a general
assignment for the benefit of creditors, file a petition or
an answer seeking reorganization or arrangement with
creditors or take advantage of any insolvency law, or file an
answer admitting the material allegations of a petition filed
against Manager in any bankruptcy, reorganization or
insolvency proceeding, or if any order, judgment or decree
shall be entered by any court of competent jurisdiction, on
the application of a creditor, adjudicating Manager a
bankrupt or insolvent or approving a petition seeking
reorganization of Manager or appointing a receiver, trustee
or liquidator of Manager or of all or a substantial part of
its assets, and such order, judgment or decree shall continue
unstayed and in effect for any period of sixty (60)
consecutive days;
(c) if a right of termination on the part of Lessee
shall have arisen under Sections 10.01 or 10.02;
(d) the License Agreement is terminated due to the
action or inaction of Manager;
(e) the Hotel is sold pursuant to a Permitted
Transfer under Section 9.03.2(a) or (b); or
(f) In any Operating Year, Manager fails to both (1)
achieve 90% of budgeted Gross Operating Profit for the
Operating Year, provided, however, Manager shall have the
right, but not the obligation, to cure such failure by within
sixty (60) days following the end of such Operating Year,
contributing to Gross Operating Profit for such Operating
Year an amount necessary to cause Gross Operating Profit to
equal at least ninety percent (90%) of the amount of Gross
Operating Profit set forth in the Operating Budget for such
Operating Year, in which event Lessee shall have no right to
terminate this Management Agreement with respect to the
Hotel; and (2) fails to maintain a ▇▇▇▇▇ Travel Research
RevPar Share Index of at least 110% market share for the
Operating Year.
then Lessee shall have the right to terminate this Agreement upon written notice
to Manager given at any time following the occurrence of such event, or if a
period of grace is provided, then following the expiration of the applicable
grace period, and while such event shall be continuing, and this Agreement shall
terminate upon the date specified therein, which date shall be not less than
thirty (30) days nor more than seventy-five (75) days after the date of the
giving of such notice.
8.02 Termination by Manager. If any of the following events shall
happen:
(a) Lessee shall fail to provide funds to be
deposited in the Local Operating Account in accordance with
the provisions of Section 7.02 within ten (10) days after
Manager's request for such additional funds, and such failure
continues for an additional ten (10) day period after written
notice by Manager to Lessee that such funds have not yet been
received;
(b) Lessee shall fail to keep, observe or perform any
other material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Lessee, and
such default shall continue for a period of thirty (30) days
after notice thereof by Manager to Lessee;
(c) [Intentionally Deleted.]
(d) Lessee shall apply for or consent to the
appointment of a receiver, trustee or liquidator of Lessee or
of all or a substantial part of its assets, file a voluntary
petition in bankruptcy or admit in writing its inability to
pay its debts as they come due, make a general assignment for
the benefit of creditors, file a petition or an answer
seeking reorganization or arrangement with creditors or to
take advantage of any insolvency law, or file an answer
admitting the material allegations of a petition filed
against Lessee in any bankruptcy, reorganization or
insolvency proceeding, or if an order, judgment or decree
shall be entered by any court of competent jurisdiction, on
the application of a creditor, adjudicating Lessee a bankrupt
or insolvent or approving a petition seeking reorganization
of Lessee or appointing a receiver, trustee or liquidator of
Lessee or of all or a substantial part of the assets of
Lessee, and such order, judgment or decree shall continue
unstayed and in effect for any period of sixty (60)
consecutive days;
(e) if because of a default under the Ground Lease
(if any) or the Mortgage, the Ground Lease shall be
terminated or the Mortgage shall be foreclosed (or the Hotel
sold in lieu of foreclosure) or such steps shall be taken to
terminate the Ground Lease or foreclose on the Mortgage such
that Manager's ability to manage the Hotel shall be
materially adversely affected; or
(f) Lessee shall be in default under the License
Agreement and such default shall have continued after the
expiration of any applicable grace period with respect
thereto or the License Agreement shall have been terminated,
then Manager shall have the right to terminate this Agreement upon written
notice to Lessee given at any time following the occurrence of any such event,
or if a period of grace is provided, then following the expiration of the
applicable period, and while such event shall be continuing, and this Agreement
shall terminate upon the date specified therein, which date shall be not less
than thirty (30) days nor more than seventy-five (75) days after the date of the
giving of such notice.
8.03 Curing Defaults. Any default by Manager under clause (a) of
Section 8.01 or Lessee under clause (b) of Section 8.02, as the case may be,
which is susceptible of being cured, shall not constitute a basis of termination
if the nature of such default shall not permit it to be cured within the grace
period allotted, provided that within such grace period either Manager or Lessee
shall have commenced to cure such default and shall proceed to complete the same
with reasonable diligence.
8.04 Effect of Termination. The termination of this Agreement under the
provisions of this Article VIII shall not affect the rights of the terminating
party with respect to any damages it has suffered as a result of any breach of
this Agreement, nor shall it affect the rights of either party with respect to
liability or claims accrued, or arising out of events occurring, prior to the
date of termination.
8.05 Remedies.
(a) If this Agreement is terminated due to an event
of default by Lessee arising under Section 8.02which
remains uncured after any applicable cure period, Manager
shall be entitled to all damages incurred by Manager as a
result of such default, including damages resulting from
early termination of the Agreement, including but not
limited to an early termination fee equal to the average
monthly amount of the total Management Fee, including
Incentive fees paid or which would have been due or owed
to Manager for the Hotel during the immediately preceding
twelve (12) month period, multiplied by the lesser of
either (i) thirty six (36), provided there are at least
three (3) years remaining under the Term, or (ii) the
total number of months remaining under the Term if there
is less than three (3) years remaining under the Term.
(b) If this Agreement is terminated due to an event
of default by Manager arising under Section 8.01(a) and
(d) which remains uncured after any applicable cure
period, Lessee shall be entitled to all damages incurred
by Lessee as a result of such default, including damages
resulting from early termination of the Agreement, but
excluding punitive damages(c) Neither the right of
termination nor the right to ▇▇▇ for damages nor any other
remedy available to either party hereunder shall be
exclusive of any other remedy given hereunder or now or
hereafter existing at law or in equity.
8.06 Intentionally Deleted.
8.07 Preservation of Books and Records. In the event of the expiration
or earlier termination of this Agreement, Lessee shall preserve all books and
records, files and correspondence remaining at the Hotel in accordance with
Lessee's record retention guide then in effect after the expiration or
termination of this Agreement, and Lessee shall provide access to Manager, and
its representatives, to such books, records, correspondence and files at all
reasonable times.
8.08 Extension Date of Termination. Notwithstanding any contrary
provision of this Agreement, the date of termination of this Agreement, other
than upon expiration pursuant to Article 2.01, shall be extended so that the
date of termination after notice of termination is given to or by Manager shall
be on a date which is not earlier than fifteen (15) days plus the number of
days, if any, Manager is required to give its employees advance notice of
termination of employment as required by the Worker Adjustment and Retraining
Act, 29 U.S.C., ss.2101 et. seq., as hereafter amended, or any similar federal
or state statute.
ARTICLE IX
TITLE MATTERS
9.01 Title to Hotel. Lessee covenants that, as of the date hereof, it
has either good and marketable fee title to, or a valid and subsisting
leasehold estate in, the Land. Lessee further covenants that, subject to the
terms and conditions of this Article IX, throughout the term of this
Agreement it shall maintain full ownership in such fee interest or leasehold
estate in the Premises, and good title to the FF&E and the Operating
Equipment.
9.02 Sale or Assignment by Manager.
9.02.1 Prohibited Transfers. Except as provided in the
following Subsection 9.02.2, Manager shall not assign this Agreement,
voluntarily or by operation of law, without the prior written consent of Lessee.
The disposition by Manager of its controlling interest in any Affiliate to which
it has previously assigned this Agreement, shall be deemed to be a prohibited
assignment hereunder requiring the prior written consent of Lessee. Further,
Manager shall not transfer or sell its Management Company, or dispose of the
controlling interest of ▇▇▇▇▇▇▇▇ Brothers (or an affiliate thereof) without
Lessee's consent, which shall not be unreasonably withheld. It is understood and
agreed that any consent granted by Lessee to any such assignment or other
transfer shall not be deemed a waiver of the covenant herein contained against
assignment or transfer in any subsequent case. No assignment or transfer of this
Agreement shall operate to release Manager from any of its obligations under
this Agreement.
9.02.2 Permitted Transfers. Manager, without the consent of
Lessee, shall have the right to assign this Agreement to any Affiliate of
Manager. Upon execution of any assignment as aforesaid under this Subsection
9.02.2, or with Lessee's consent under Subsection 9.02.1, notice thereof in the
form of a duplicate original of such assignment shall be delivered to Lessee
forthwith.
9.03 Sale, Lease or Assignment by Lessee.
9.03.1 Prohibited Transfers. Except as otherwise provided
herein, Lessee (or the owner of the Hotel) agrees that, without the consent of
Manager, which shall not be unreasonably withheld, it will not sell, lease or
otherwise transfer or convey the Hotel, or any part thereof, or assign this
Agreement, except as provided in this Section 9.03; such prohibition shall
apply, without limitation, to any sale and leaseback transaction.
Notwithstanding the foregoing, Lessee may, without Manager's consent, sell or
otherwise transfer any part of the Land, or grant easements on or across the
Land, provided such conveyances do not materially and adversely affect the
operation of the Hotel.
9.03.2. Permitted Transfers.
(a) If the Term of this Agreement is not on a
month-to-month basis, and if Lessee (or the owner of the
Hotel) shall have received a bona fide written offer to
purchase or lease the Hotel and Lessee (or the owner of the
Hotel), pursuant to the terms of such offer, desires to sell
or lease the Hotel to any person, firm or corporation, Lessee
(or the owner of the Hotel) shall have the right to sell the
Hotel and terminate this Agreement, provided either (a)
Lessee pays to Manager a termination payment equal to the
average monthly amount of the total Management Fee, including
incentive fees paid or which would have been due or owed to
Manager for the Hotel during the immediately preceding twelve
(12) month period of the Term (or during the actual number of
months that have elapsed in the Term if such number of months
is less than twelve months), multiplied by the lesser of
either (i) Thirty Six (36), provided there are at least three
(3) years remaining under the Term, or (ii) the total number
of months remaining under the Term if there is less than
three 3) years remaining under the Term; or (b) within sixty
(60) days following termination, Lessee or any Affiliate)
enters into a management agreement with Manager for a
replacement hotel or hotels that are commercially reasonably
acceptable to Manager, which replacement property shall be a
reasonable distance from other hotels that Manager manages
and have budgeted annual Gross Operating Revenues no less
than the actual annual Gross Operating Revenues of the
terminated Hotel (provided that, if Lessee elects to replace
pursuant to this clause (b), for any period in which a
replacement management agreement is not yet in place Lessee
shall pay to Manager the fees which Manager would have
received for such period if the termination had not
occurred); or (c) Manager is engaged by the third party
purchaser to manage the Hotel, on terms acceptable to Manager
in its sole discretion, within sixty (60) days following such
termination.
(b) If the Term of this Agreement is on a
month-to-month basis, Lessee (or the owner of the Hotel) may
sell or otherwise transfer the Hotel, and terminate this
Agreement, upon thirty (30) days written notice to Manager.
(c) Notwithstanding the foregoing, Lessee (or the
owner of the Hotel) may sell or otherwise transfer the Hotel
to any Affiliate of the Lessee at any time.
(d) Notwithstanding the foregoing, Lessee (or the
owner of the Hotel) may grant a mortgage, deed of trust, or
other encumbrance or security interest ("Mortgage") in the
Hotel or any part thereof from time to time.
9.04 Successors and Assigns. Subject to the foregoing, this Agreement shall
inure to the benefit of and be binding upon the parties hereto, their respective
heirs, legal representatives, successors and assigns, and with respect to
Lessee, the phrase "successors and assigns" shall include purchasers and
lessees, or sublessees, of Lessee's interest in the Premises.
ARTICLE X
DAMAGE OR DESTRUCTION;
EMINENT DOMAIN
10.01 Damage or Destruction. If the Hotel shall be substantially
damaged by fire or other casualty, or in the event that Mortgagee does not make
sufficient proceeds of insurance available to Lessee to permit Lessee to rebuild
and restore the Premises to a condition which permits the continued operation of
the Hotel by Manager as contemplated by this Agreement, then Lessee or Manager,
by written notice to the other party given within sixty (60) days after the
occurrence of such event, shall have the right to terminate this Agreement on
the basis that Lessee does not elect to rebuild or restore the Hotel, and
neither party shall have any further obligation to the other party hereunder,
except with respect to liability accruing, or based upon events occurring, prior
to the effective date of such termination. Notwithstanding the foregoing, if
Lessee terminates this Agreement due to fire or casualty as provided above,
Lessee shall pay to Manager a termination fee equal to the average monthly
amount of the total Management Fee, including Incentive fees paid or which would
have been due or owed to Manager for the Hotel during the immediately preceding
twelve (12) month period, multiplied by the lesser of either (i) thirty six
(36), provided there are at least three (3) years remaining under the Term, or
(ii) the total number of months remaining under the Term if there is less than
three (3) years remaining under the Term. Manager shall not be entitled to any
such termination fee in the event Manager terminates as provided above. For the
purposes hereof, the Hotel shall be deemed to have been substantially damaged if
the estimated length of time required to restore the Hotel substantially to its
condition and character just prior to the occurrence of such casualty shall be
in excess of one hundred eighty (180) days. If this Agreement shall not
terminate in the event of damage to the Hotel, either because (i) the damage
does not amount to substantial damage as described above, or (ii)
notwithstanding substantial damage to the Hotel, neither party has elected to
terminate this Agreement, Lessee shall elect to restore the Hotel, then Lessee
shall proceed with all due diligence to commence and complete the restoration of
the Hotel to its condition and character just prior to the occurrence of such
casualty, but only to the extent of insurance proceeds available to Lessee.
10.02 Eminent Domain. If all of the Premises, or such substantial portion
thereof as to make it infeasible, in the reasonable opinion of Lessee or
Manager, to restore and continue to operate the remaining portion for the
purposes contemplated hereby, shall be taken through the exercise, or by
agreement in lieu of the exercise, of the power of eminent domain, then
effective upon the date that Lessee shall be required to surrender possession of
the Premises, or a portion thereof, either party may terminate this Agreement
and neither party shall have any further obligation to the other party
hereunder, except with respect to liabilities accruing, or based upon events
occurring, prior to the effective date of such termination. In the event a
substantial portion of the Premises is taken, but Mortgagee fails or refuses to
make available to Lessee sufficient proceeds of such eminent domain proceedings
in order to permit Lessee to make appropriate alterations, restorations or
repairs to the remainder of the Premises, so that the Hotel would continue to be
operable for the purposes herein contemplated, then Lessee shall have the right
to terminate this Agreement upon written notice to Manager and, upon the date
that Lessee shall be required to surrender possession of the Premises to the
condemning authority, this Agreement shall terminate and neither party shall
have any further obligation to the other party hereunder, except with respect to
liabilities accruing, or based upon events occurring, prior to the effective
date of such termination. Any election to terminate this Agreement must be made
within thirty (30) days of receipt of actual written notice from the condemning
authority setting out the details of the proposed taking. If such notice does
not provide the parties with sufficient detail so that a decision may be made
regarding termination, the parties may mutually agree to extend the above time
period in their discretion. In the event this Agreement is not terminated due to
eminent domain in this section 10.02, then Lessee shall proceed with all due
diligence to repair any damage to the Hotel, or to alter or modify the Hotel so
as to render it a complete architectural unit which can be operated as a hotel
of substantially the same type and class as before, but only to the extent of
condemnation proceeds available to Lessee. Lessee and/or its Lessor shall be
solely entitled to any Award, subject only to any exceptions set out below.
Manager may seek an award from the condemning authority for its loss of business
interest only, if such separate claim is permitted. In the event the condemning
authority does award Manager for such loss, Manager shall only be entitled to
retain that portion of its condemnation award which is necessary to compensate
Manager for its lost management fees, which shall be calculated in the same
manner as termination fees for Damage by Casualty, as set out above in Section
10.01. Manager shall promptly remit any additional amount to Lessee. In the
event any jurisdiction would permit both Manager and Lessee to seek an award for
their loss of business interests (respectively), this section shall not prohibit
Lessee from making a separate claim therefor. Lessee shall compensate Manager
for its lost management fees (calculated in the same manner as termination fees
for Damage by Casualty, as set out above in Section 10.01) only if Manager is
not permitted to seek an award directly from the condemning authority, and only
to the extent of any actual condemnation proceeds received by Lessee.
ARTICLE XI
REPRESENTATIONS
11.01 Manager's Representations. The Manager covenants, represents
and warrants as follows:
11.01.1 Qualified Lodging Facility. During the Term of this Agreement,
the Manager shall qualify as an "eligible independent contractor" as defined in
Section 856(d)(9) of the Internal Revenue Code of 1986, as amended (the "Code").
To that end, during the Term of this Agreement, the Manager:
(i) shall not permit wagering activities to be
conducted at or in connection with the Hotel;
(ii) shall not own, directly or indirectly (within
the meaning of Section 856(d)(5) of the Code), more than 35%
of the shares of Equity Inns, Inc.;
(iii) shall be actively engaged in the trade or
business of operating "qualified lodging facilities" (defined
below) for persons who are not "related persons" within the
meaning of Section 856(d)(9)(F) of the Code with respect to
Equity Inns, Inc. or the Lessee ("Unrelated Persons"). In
order to meet this requirement, the Manager agrees that it
(i) shall derive at least 10% of both its revenue and profit
from operating "qualified lodging facilities" for Unrelated
Persons and (ii) shall comply with any regulations or other
administrative guidance under Section 856(d)(9) of the Code
with respect to the amount of hotel management business with
Unrelated Persons that is necessary to qualify as an
"eligible independent contractor" within the meaning of such
Code section (so long as the Lessee has advised the Manager
in writing of such regulations or other administrative
guidance).
A "qualified lodging facility" is defined in Section 856(d)(9)(D) of the Code
and means a "lodging facility" (defined below), unless wagering activities are
conducted at or in connection with such facility by any person who is engaged in
the business of accepting ▇▇▇▇▇▇ and who is legally authorized to engage in such
business at or in connection with such facility. A "lodging facility" is a
hotel, motel or other establishment more than one-half of the dwelling units in
which are used on a transient basis, and includes customary amenities and
facilities operated as part of, or associated with, the lodging facility so long
as such amenities and facilities are customary for other properties of a
comparable size and class owned by other owners unrelated to Equity Inns, Inc.
11.01.2 Rents from Real Property. During the Term of this Agreement,
the Manager shall not sublet the Hotel or enter into any similar arrangement on
any basis such that the rental or other amounts to be paid by the sublessee
thereunder would be based, in whole in part, on either (i) the net income or
profits derived by the business activities of the sublessee or (ii) any other
formula such that any portion of the rent would fail to qualify as "rents from
real property" within the meaning of Section 856(d) of the Code, or any similar
or successor provision thereto.
11.01.3 Termination for Failure of Representations. In the event that
the foregoing representations become false, Lessee shall have the rights
afforded by Section 8.01 herein, and Manager shall have the benefit of any cure
period offered therein. Notwithstanding the foregoing and/or anything in Section
8.01 or elsewhere herein to the contrary, should the REIT status of Equity Inns,
Inc. and/or Equity Inns Trust be threatened because the foregoing
representations are false, then any cure period offered in Section 8.01 shall be
reduced in part or in full to the extent necessary to avoid any termination or
other material impact on the REIT status of Equity Inns, Inc. and/or Equity Inns
Trust whereupon Lessee may summarily terminate this Agreement upon written
notice to Manager, and subject to Lessee's existing loan documents.
11.02 Representations of Lessee. The Lessee covenants, represents and
warrants as follows:
(a) The Lessee is the lessee of the Hotel and has full power and authority
to enter into this Agreement;
(b) The Hotel is zoned for use as a hotel, motor hotel or resort, and all
necessary governmental and other permits and approvals for such use and for the
food and beverage (including the sale and service of liquor, if applicable)
operations of the Hotel have been obtained and are in full force and effect; and
(c) Throughout the term of this Agreement, the Lessee will pay, keep,
observe and perform all payments, terms, covenants, conditions and obligations
under any lease or other concession, any deed of trust, mortgage or other
security agreement, and any real estate taxes or assessments covering or
affecting the Hotel, unless compliance with or payment thereof is, in good
faith, being contested and enforcement thereof is stayed.
ARTICLE XII
GENERAL PROVISIONS
12.01 Purchases from Manager and Manager's Affiliates. In purchasing
goods, supplies, equipment and services for the Hotel, including, without
limitation, Operating Supplies, Operating Equipment, insurance and long distance
telephone services, Manager may utilize purchasing procurement services of
affiliates of Manager and/or other group buying techniques involving Other
Managed Hotels, as well as other hotels operated by Manager and its Affiliates,
provided that the cost thereof shall be competitive with that which would be
charged by non-affiliated third party vendors in an arms-length transaction. In
such event, such affiliates and/or Manager (as the case may be) may ▇▇▇▇ up
their costs or receive and retain a fee or other compensation from vendors and
service providers for their services in making the benefit of volume purchases
available to the Hotel or negotiating and implementing the arrangements with
such vendors or providers, provided that the total cost thereof (including such
▇▇▇▇-up, fee or other compensation charged or retained by Manager or its
affiliates) shall be competitive as aforesaid.
12.02 Budgets. In preparing all budgets and Operating Budgets to be
submitted to Lessee hereunder, including, without limitation, the Capital
Renewals Budgets under Section 4.02, Manager shall base its estimates upon the
most recent and reliable information then available, taking into account the
location of the Hotel and its experience in other comparable hotels. Manager
reserves the right, and shall have the obligation, to update and revise any such
budgets and Operating Budgets from time to time during the periods covered
thereby to reflect variables and events not reasonably within the control of
Manager. All such updates and revisions of the Capital Renewals Budget and the
Operating Budgets (to the extent any such changes in the Operating Budgets
indicate shortfalls which would necessitate a need for additional working
capital to be provided by Lessee) shall be submitted, together with reasonable
explanations of the reasons for such charges, to Lessee for its approval. Lessee
agrees that it shall promptly reply to any such submissions giving its approval
or stating the grounds on which it is withholding its approval.
12.03 Indemnities.
12.03.1 Indemnification to Manager. Lessee shall indemnify and
hold Manager harmless from and against any and all actions, suits, claims,
penalties, losses, damages and expenses, including reasonable attorneys' fees,
based upon or arising out of Manager's performance of its services hereunder, or
out of any occurrence or event happening in or about the Hotel or occurring in
connection with the operation or development thereof, including any alleged
breach, or investigation relating to a possible breach, of any Legal Requirement
(collectively "Claims"), except to the extent such Claims are based upon
Manager's gross negligence, willful misconduct, breach of contract or failure to
act in good faith. and except to the extent such Claims are based upon Manager's
employment practices.
12.03.2 Indemnification To Lessee. Manager shall indemnify and
hold Lessee harmless from and against any and all Claims which Lessee may
suffer, sustain or incur arising from, or based upon Manager's gross negligence,
willful misconduct, breach of contract or failure to act in good faith.
12.03.3 Intentionally Deleted.
12.03.4 Indemnified Parties. The indemnities contained in this
Section 12.03 shall run to the benefit of both Manager and Lessee and their
respective Affiliates and the directors, partners, members, managers, officers
and employees of Manager and Lessee and their respective Affiliates.
12.03.5 Intentionally Deleted.
12.03.6 Survival. The provisions of Section 12.03 shall
survive any cancellation, termination or expiration of this Agreement and shall
remain in full force and effect until such time as the applicable statute of
limitation shall cut off all demands, claims, actions, damages, losses,
liabilities or expenses which are the subject of the provisions of this Section
12.03.
12.04 Arbitration of Financial Matters.
12.04.01 Matters to be Submitted to Arbitration. In the case
of a dispute with respect to any of the following matters, either party may
submit such matter to arbitration which shall be conducted by the Accountants
(as hereinafter defined in Subsection 12.04.2):
(a) computation of the Management Fee;
(b) reimbursements due to Manager under the
provisions of Section 4.07;
(c) any adjustment in dollar amounts of insurance
coverages required to be maintained; and
(d) any dispute concerning the approval of a
Operating Budgets or a Capital Budget.
12.04.2 The Accountants. The "Accountants" shall be one of the
"Big Four" firms of certified public accountants of recognized national
standing, i.e., PricewaterhouseCoopers, Ernst & Young, KPMG Peat Marwick, and
Deloitte and Touche (or the successors thereto) notwithstanding any existing
relationships which may exist between Lessee and such accounting firms or
Manager and such accounting firms. The party desiring to submit any matter to
arbitration under Subsection 12.04.1 shall do so by written notice to the other
party, which notice shall set forth the items to be arbitrated and such party's
choice of one of the four (4) accounting firms. The party receiving such notice
shall within fifteen (15) days after receipt of such notice either approve such
choice, or designate one of the remaining firms by written notice back to the
first party, and the first party shall within fifteen (15) days after receipt of
such notice either approve such choice or disapprove the same, and the same
procedure shall be followed until the parties approve one of such firms or there
is only one remaining firm not designated by either party. If both parties shall
have approved one of the firms under the preceding sentence, then such firm
shall be the "Accountants" for the purposes of arbitrating the dispute; if the
parties are unable to agree on an accounting firm, then the remaining firm,
which was not designated by either party, shall be the "Accountants" for such
purpose. The Accountants shall be required to render a decision in accordance
with the procedures described in Subsection 12.04.3 within fifteen (15) days
after being notified of their selection. The fees and expenses of the
Accountants will be paid by the non-prevailing party.
12.04.3 Procedures. In all arbitration proceedings submitted
to the Accountants, the Accountants shall be required to agree upon and approve
the substantive position advocated by Lessee or Manager with respect to each
disputed item. Any decision rendered by the Accountants that does not reflect
the position advocated by Lessee or Manager shall be beyond the scope of
authority granted to the Accountants and, consequently, may be overturned by
either party. All proceedings by the Accountants shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such act are modified by this Agreement or the mutual agreement of the
parties. Unless otherwise agreed, all arbitration proceedings shall be conducted
at the Hotel.
12.05 Attorneys' Fees. In the event of any litigation arising out of
this Agreement, the prevailing party shall be entitled to reasonable costs and
expenses, including without limitation, reasonable attorneys' fees.
12.06 Intentionally Omitted.
12.07 No Restriction. Lessee agrees that Manager has and shall retain
the right to own, have an ownership interest in, develop, operate, manage,
license, franchise, sell or rent other hotels or inns of any kind, or shared
ownership projects commonly known as vacation ownership or time-share ownership
projects (or similar real estate projects), under the "Manager" or other name
and wherever located except on the Land under this Agreement, and nothing
contained in this Agreement shall prohibit or limit Manager from engaging in any
such activities, which shall not give rise to any liability for claims relating
to unfair competition and/or breach of the implied covenant of good faith and
fair dealing; provided that Manager shall not own, have an interest in develop,
operate, manage, license, or rent a hotel within the geographic radius of the
Competitive Set of the Hotel as listed in the ▇▇▇▇▇ Travel Research Report as of
the date of this Agreement, except as is provided in the Right of First Refusal
in the Purchase and Sale Agreement for this Property or with Lessee's written
consent.
12.08 Major Capital Improvements.
12.08.1 Major Capital Improvements. Any program of capital
improvements, involving an addition to the Hotel, or designed to substantially
upgrade or change the nature or image of the Hotel (as opposed to a renovation
or refurbishing which takes place as part of the normal or cyclical upkeep of
the Hotel), shall be deemed to be a "Major Capital Improvement." Major Capital
Improvements will be undertaken only at the request of Lessee, whether on its
own initiative or at the suggestion of Manager, and in any event shall not be
included in the Capital Renewals Budgets.
12.08.2 Development. The development of any Major Capital
Improvement shall be the responsibility of Lessee and shall be paid for out of
separate funds of Lessee.
12.08.3 Prohibition on Casinos. In no event shall a casino be
added to the Premises or built as a separate structure on any portion of the
Land; nor shall any casino or gaming operations be conducted on the Premises.
12.09 Force Majeure. If act of God, acts of war, acts of terrorism,
civil disturbance, labor strikes, governmental action, including the revocation
of any material license or permit necessary for the operation contemplated in
this Agreement where such revocation is not due to Manager's fault, or any other
causes beyond the control of Manager shall, in Manager's reasonable opinion,
have a significant adverse effect upon the operations of the Hotel, then Manager
shall be entitled to terminate this Agreement upon sixty (60) days' written
notice from the date of such event; provided, however, such termination shall
not be effective if the event giving rise to the termination has been cured to
the reasonable satisfaction of Manager within such sixty (60) day period.
12.10 Notices. Except as otherwise provided in this Agreement, all
notices, demands, requests, consents, approvals and other communications (herein
collectively called "Notices") required or permitted to be given hereunder, or
which are to be given with respect to this Agreement, shall be in writing sent
by registered or certified mail, postage prepaid, return receipt requested,
addressed to the party to be so notified as follows:
If to Lessee:
------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Manager:
McKibbon Hotel Management, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Any Notice shall be deemed delivered upon receipt. Either party may at any time
change the addresses for Notices to such party by mailing a Notice as aforesaid.
Notices may also be delivered by (i) hand, (ii) special courier, or (iii)
telegram, telex or other electronic written communication, provided that in
utilizing any form of delivery authorized by clause (iii) of this sentence,
receipt of such notice must be acknowledged by the addressee through appropriate
written communication.
12.11 No Lease, Partnership or Joint Venture. Nothing contained in this
Agreement shall be construed to be or create a lease, partnership or joint
venture between Lessee, its successors or assigns, on the one part, and Manager,
its successors and assigns, on the other part. Manager is an independent
contractor of the Lessee.
12.12 Modification and Changes. This Agreement cannot be changed or
modified except by another agreement in writing signed by the party sought to be
charged therewith, or by its duly authorized agent.
12.13 Understandings and Agreements. This Agreement constitutes all of
the understandings and agreements of whatsoever nature or kind existing between
the parties with respect to Manager's management of the Hotel. The parties each
hereby acknowledge, represent and agree that in entering into this Agreement,
they are not relying upon any statement, representation or promise, or the
failure to make any statement, representation or promise, of any other party (or
of any officer, agent, employee, representative or attorney for any other
party), in executing this Agreement except as expressly stated herein.
12.14 Headings. The Article, Section and Subsection headings contained
herein are for convenience and reference only and are not intended to define,
limit or describe the scope or intent of any provision of this Agreement.
12.15 Consents. Except as specifically otherwise provided in this
Agreement, each party agrees that it will not unreasonably withhold any consent
or approval requested by the other party pursuant to the terms of the Agreement,
and that any such consent or approval shall not be unreasonably delayed or
qualified. Similarly, each party agrees that any provision of this Agreement
which permits such party to make requests of the other party, shall not be
construed to permit the making of unreasonable requests.
12.16 Survival of Covenants. Any covenant, term or provision of this
Agreement which, in order to be effective, must survive the termination of this
Agreement, shall survive any such termination.
12.17 Third Parties. None of the obligations hereunder of either party
shall run to or be enforceable by any party other than the party to this
Agreement or by a party deriving rights hereunder as a result of an assignment
permitted pursuant to the terms hereof.
12.18 Waivers. No failure by Manager or Lessee to insist upon the
strict performances of any covenant, agreement, term or condition of this
Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, term or condition. No covenant, agreement, term or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
12.19 Partial Invalidity. Any provision of this Agreement prohibited by
law or by court decree in any locality or state shall be ineffective to the
extent of such prohibition without in any way invalidating or affecting the
remaining provisions of this Agreement, or without invalidating or affecting the
provisions of this Agreement within the states or localities where not
prohibited or otherwise invalidated by law or by court decree. Further, in the
event that any provision of this Agreement shall be held unenforceable by virtue
of its scope, but may be made enforceable by a limitation thereof, such
provision shall be deemed to be amended to the minimum extent necessary to
render it enforceable under the laws of the jurisdiction in which enforcement is
sought.
12.20 Applicable Law. This Agreement shall be construed and be governed by
the laws of the State in which the Premises are located.
12.21 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.22 Subordination. This Agreement shall be subordinate to any mortgage
encumbering the Hotel, and Manager agrees to enter into a lender-manager
agreement with respect to the Hotel, which agreement shall contain reasonable
lender-manager provisions, including, without limitation, Manager's
acknowledgement that its real estate interest in and to the Hotel, if any,
created by this Agreement is subordinate to any mortgage encumbering such Hotel,
including providing any purchaser of such Hotel at a foreclosure sale or
deed-in-lieu of foreclosure (including the lender) with the right to terminate
this Agreement with respect to such Hotel; provided, however, in no event will
Manager agree to subordinate or waive its right to receive fees, reimbursements
or indemnification payments under this Agreement arising prior to termination
(but (a) if this Agreement is terminated by the lender or such purchaser with
respect to such Hotel, Manager shall not look to the lender for payment of such
fees, reimbursements or indemnification payments and Manager's right to receive
such fees, reimbursements or indemnification payments shall be subordinated to
the lender's rights and (b) if this Agreement is not terminated by the lender or
such purchaser with respect to such Hotel, then such fees, reimbursements or
indemnification payments shall be payable by the lender or such purchaser).
12.23 Compliance with License Agreement. During the Term of this Agreement and
so long as the Hotel is licensed as a Marriott International, Inc. ("Marriott")
product, the following provisions shall apply to such Hotel:
A. Subject to the provisions of this Agreement, Lessee and
Manager acknowledge and agree that the Manager shall have the
authority for the day-to-day management of the Hotel;
B. Subject to the provision by Lessee of sufficient funds to so
comply, the Manager will operate the Hotel during the Term of
this Agreement in strict compliance with the Marriott License
Agreement (specifically including, but not limited to,
Licensee's obligation to pay any and all fees, charges and
contributions set forth in the License Agreement) and Manager
shall keep the License Agreement in full force and effect
throughout the term of this Agreement;
C. Except in extraordinary circumstances, such as theft or fraud
on the part of the Manager or default by Lessee under the
License Agreement caused by the Manager for which the Lessee
needs to promptly remove the Manager from the Hotel, this
Agreement shall not be terminated by Lessee without at least
thirty (30) days' prior written notice to Marriott;
D. If there are conflicts between any provision(s) of this
Agreement and the License Agreement, the provision(s) of the
License Agreement shall control; and
E Manager and Lessee acknowledge that the License Agreement
permits Marriott to communicate directly with the Manager
regarding day-to-day operation of the Hotel.
Nothing in this Agreement shall be interpreted in a manner which would
either (i) relieve Lessee of any of its obligations under the License Agreement
or (ii) prevent Lessee from validly contesting provisions of the License
Agreement.
12.24 Closing Contingency. This Agreement will only become effective
upon the successful closing of the purchase and sale of the Hotel from an
affiliate of Manager to an affiliate of Lessee.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed, all as of the day and year first above written.
LESSEE:
------------------------------------
By__________________________________
MANAGER:
▇▇▇▇▇▇▇▇ HOTEL MANAGEMENT, INC.,
a Georgia corporation
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
MANAGEMENT FEE RIDER
▇. ▇▇▇▇▇ Operating Revenues. The term Gross Operating Revenues
as used in this Agreement shall mean all receipts, revenues, income and proceeds
of sales of every kind received by Manager directly or indirectly from the
operation of the Hotel. Gross Operating Revenues shall exclude all sales and
excise taxes and any similar taxes collected as direct taxes payable to taxing
authorities; gratuities or service charges collected for payment to and paid to
employees; credit or refunds to guests; proceeds of insurance, save and except
for proceeds of insurance with respect to use and occupancy or business
interruption insurance; proceeds of sales of real estate and/or furniture,
fixtures and equipment; proceeds of refinancings; and proceeds of condemnation.
B. Net Operating Income. The term "Net Operating Income" as
used in this agreement shall mean the excess, during each Calendar Year (and
proportionally for any period less than a Calendar Year), of Gross Operating
Revenues over expenses and deductions incurred in the operation of the Hotel by
Manager in fulfilling its duties hereunder during such period determined in
accordance with the accounting system established by the Uniform System (except
as modified by this Agreement). In arriving at Net Operating Income, all
expenses shall be proper deductions from Gross Operating Revenues insofar as
they relate to the operation of the Hotel, including, without limit, all Base
Management Fees, license fees, franchisor royalties, real estate and special
assessment taxes, property and liability insurance, a reserve of four percent
(4%) of Gross Operating Revenue for capital improvements (whether or not such
reserve is held in escrow) and fees and direct out-of-pocket charges of Manager
or its affiliates as well as corporate charges (as described below).
In accordance with Manager's past practices, out-of-pocket costs and corporate
charges may include, but are not limited to ravel costs for corporate staff
traveling specifically on behalf of or for the benefit of the Hotel;
C. RevPar Index. The term "RevPar Index" as used in this
Agreement shall mean the Competitive Set RevPar Index as reported by ▇▇▇▇▇
Travel Research. The Competitive Set included in the STR reports shall be the
Competitive Set in existence at the time this Agreement is executed and shall be
attached hereto as Exhibit "A" to Management Fee Rider and may not be changed
except by the mutual agreement of the Lessee and the Manager. The RevPar Index
used in the calculation of the Additional Incentive Fee shall be the year to
date RevPar Index for the latest STR Report in existence when final year-end
financial statements are delivered to Lessee.
D. Base Management Fee. During each Calendar Year after the
Management Commencement Date (and for a fraction of any partial Calendar Year),
in consideration of the services Manager is to render under this Agreement,
Manager will be paid a fee ("Base Management Fee") at the rate of three percent
(3.0%) of Gross Operating Revenues of the Hotel per Calendar Year:
The Base Management Fee will be paid in installments by deducting such
fee from Gross Operating Revenues of the Hotel immediately following each
Accounting Period at the rate of the corresponding percentage of Gross Operating
Revenues for that Accounting Period. At the end of each Accounting Period, an
adjustment will be made on a cumulative year-to-date basis, if necessary, and
all sums due either the Manager or Lessee shall be paid immediately.
E. Incentive Fees. In addition to the Base Management Fee,
during each Calendar Year after the Management Commencement Date (and for any
partial Calendar Year) in which Manager is to render services under this
Agreement, Manager will be paid an incentive fee as follows:
For any Calendar Year in which the Net Operating Income of the
Hotel is greater or equal to Target NOI, Manager shall be paid
an Incentive Fee equal to 1% of Gross Operating Revenues.
If payment of the Incentive Fee, when subtracted from the Net
Operating Income of the Hotel results in an amount less than
the Target NOI amount, the Incentive Fee will be adjusted so
that the net result of subtracting the Incentive Fee from the
Hotel's Net Operating Income for the Calendar year is not an
amount less than the Target NOI. In no event will the
Incentive Fee exceed 1% of Gross Revenue.
F. Additional Incentive Fees. In addition to the Base
Management Fee and the Incentive fee, during each Calendar Year after the
Management Commencement Date (and for any partial Calendar Year) in which
Manager is to render services under this Agreement, Manager will be paid an
Additional Incentive Fee as follows:
For any Calendar Year in which the Net Operating Income of the
Hotel, after payment of the Incentive Fee exceeds the Target
NOI, Manager shall be paid an Additional Incentive Fee as
follows:
Managers shall receive a portion of excess dollars above the
Target NOI after payment of the Incentive Fee up to 1% of
Gross Revenue. The Manager's portion of the excess dollars
shall be paid as follows:
Fee Schedule:
G. The Incentive Fee and the Additional Incentive Fee will be
payable to Manager from Gross Operating Revenues of the Hotel on a quarterly
basis with a final reconciliation following the end of each Calendar Year. The
Manager will submit to the Lessee the calculation of the Incentive Fee and the
Additional Incentive Fee quarterly along with the delivery of the year-end
financial statements pursuant to Section 7.04 of the Management Agreement, after
which the Lessee shall have ten (10) calendar days to advise the Manager of any
disagreement with such calculation quarterly and annually. Following the
Calendar Year-end audit conducted by Lessee or Lessee's representatives, an
adjustment will be made if necessary, and all sums due either Manager or Lessee
shall be paid immediately.
H. Accounting Fee. In addition to the Base Management Fee and
the Incentive Fee, the Manager shall be paid a fee for centralized accounting
services (the "Accounting Fee") equal to the amount charged by Manager monthly
for all Manager's managed hotels based on the type of hotel managed per
Accounting Period during the Term of this Agreement and for one (1) Accounting
Period after the applicable termination of this Agreement with respect to the
Hotel. The Accounting Fee shall be set annually and is intended to be a
break-even fee for the accounting department. Such centralized accounting
services consist of the processing of daily accounting transactions necessary
for the preparation of the monthly financial statements, including general
ledger, accounts payable, payroll (in conjunction with the payroll processing
firm) and banking. In addition, the following expenses are included in the
annual accounting fee
a. express mail and regular postage for items sent specifically
to or on behalf of the Hotel, which would include accounts
payable checks, weekly invoices and accounting information to
and from the Hotel, payroll checks, payroll reports and other
documents necessary for the efficient operation of the Hotel;
b. telephone and fax costs specifically for the Hotel; and
c. costs of photocopying specifically for the Hotel.
However, Lessee is responsible for all payroll processing firm fees associated
with processing the hotel's payroll as well as any banking service charges for
operating and maintaining the bank account or accounts for the hotel.
